On October 17, 2023, the CFPB took action against Chime Inc. for deceiving consumers about the speed and cost of remittance transfers through its mobile app, Sendwave. According to the CFPB’s press release, Chime also illegally forced consumers to waive their legal rights, failed to provide consumers with legally required disclosures and receipts, and failed to properly investigate consumer disputes and errors.
Chime is a nonbank fintech company incorporated in Delaware with its principal place of business in Boston. Through its Sendwave app, consumers are able to send money internationally, primarily to countries in Africa and Asia. Recipients receive the remittance transfers by delivery to a mobile wallet, bank account, or in-person cash pick-up.
From CFPB Director Rohit Chopra’s statement:
“Sendwave put illegal fine print into their contracts and tricked people who were sending money to their family overseas. The CFPB is carefully watching companies launching mobile payment transfer apps seeking to gain an unfair advantage over their law-abiding competitors.”
The CFPB found that Chime violated the Electronic Fund Transfer Act and the CFPB’s Remittance Transfer Rule. In particular, the CFPB alleges that Chime:
Forced consumers to waive their legal protections. Sendwave users were required to sign a “remittance services agreement,” which protected Chime from being responsible for losses the consumer incurred through use of the Sendwave app and limited its liability for damages to $1,000.
Made false promises about the speed and cost of remittance transfers. Chime’s marketing deceptively told consumers that Sendwave remittance transfers would be delivered “instantly,” in “30 seconds,” or “within seconds” when the transfers took much longer in reality. In addition, Chime also told consumers that transfers from US to Nigeria would incur “no fees” when in fact consumers were charged fees.
Failed to provide required disclosures. Chime did not accurately disclose the date by which funds would become available to certain recipients, and also failed to accurately represent the exchange rates to the correct decimal as required by law.
Failed to track, investigate, and resolve errors. Chime did not have proper policies and procedures in place to find and track remittance transfer errors, nor did the company conduct proper investigations of reported errors.
Failed to provide receipts in a timely manner. The Remittance Transfer Rule requires a provider offering remittance transfers solely through a mobile app to provide the consumer with a receipt within one business day of payment. The company would instead wait until funds were electronically delivered to the recipient before providing a receipt, which sometimes took more than a business day.
The CFPB found that Chime violated the various rules and regulations including the CFPA’s prohibition on deceptive acts and practices, the Electronic Fund Transfer Act and the Remittance Transfer Rule. The CFPB’s order requires Chime to:
Refund fees to affected consumers. Chime must refund certain charges to consumers who sent remittance transfers from the United States to Nigeria during the time Chime was deceptively marketing its transfers as fee-free. Chime must also refund any fees consumers paid when the Sendwave app promised delivery by a certain date and then failed to deliver the funds to the designated recipient by that date.
Pay $1.5 million into the CFPB victims relief fund. Chime is required to pay a $1.5 million penalty, which will be deposited into the CFPB victims relief fund.
Read the CFPB’s press release here.
The consent order can be found here.
